ICAEW Raises Concerns Over Criminal Justice and Police Bill

Mandy Robinson, Tax-news.com, London

09 March 2001

The Tax Faculty of the Institute of Chartered Accountants in England and Wales (ICAEW) has written to the Home Secretary detailing its concerns over Clauses 45 to 69 of the Criminal Justice and Police Bill which is currently under parliamentary consideration.

The specific concerns of the institute involve provisions that it believes will be detrimental to existing standards of compliance in investigations of tax fraud both in the UK and abroad. The provisions, argues the faculty, will compromise the Inland Revenue's current obligation of confidentiality. The letter explains: 'There are some countries where people will not disclose tax matters because evasion of tax has been coupled with, for example, evasion of exchange controls. Where a citizen would otherwise be prepared to sort out his tax position he is disinclined to do so because of a worry about the penalties for his exchange control evasion.'

Currently in the UK individuals can progress their tax affairs safe in the knowledge that information disclosed to the Inland Revenue will not be passed on to other prosecuting authorities.

The letter states: 'We accept that those who commit serious criminal offences should not be able to hide behind the Inland Revenue's duty of confidentiality. However, although there may be a handful of cases where a burglar, pornographer or a confidence trickster declares to the Inland Revenue the income that he generates from his criminal activity, we doubt that there are many instances. If this is right the Bill risks diluting the current high tax compliance level without achieving any significant public benefit.'

A futher concern raised by the institute is the 'very wide scope of disclosure provisions' which apply not only to the investigations of crimes but also to suspected or alleged crimes. Hitherto the police authorities have had the power to obtain evidence from the Inland Revenue where there is 'significant evidence' of a criminal activity but under the new law the institute complains that a suspected crime 'seems to enable the Revenue to volunteer information in order to initiate a police investigation where there is little or no evidence to support a Revenue officer's view that a crime may have been committed.'

This has led the institute to believe that tax inspectors could threaten tax payers with their ability to disclose information to the police to force them to pay tax that is not yet due or 'forego their statutory rights in relation to their tax affairs.' The letter continues: 'we are not suggesting that this is likely to occur ... what matters for the integrity of the tax system is not what is likely to occur but rather taxpayers' perceptions as to what might occur.'

The ability to pass information to prosecuting authorities from overseas is also a worry to the institute. Clause 46 empowers the Secretary of State to override the disclosure obligation but 'the power is very limited and it is in any event unclear how it will operate in practice.' The institute says it believes the Act should specifically prohibit disclosure to overseas tax authorities unless certain criteria are fulfilled, and that disclosure should only be permitted if 'the foreign authority provides credible evidence that the person concerned is reasonably suspected of a serious offence ... under UK law.'

The institute says it is seeking an assurance from the government that it will create a Code of Conduct detailing how it intends to exercise the Bill's provisions because 'there has been no indication of how the tax authorities will operate their powers under the Act ... Clause 47(3) gives the Board power to delegate to any of their staff the power to pass information to foreign governments, the police or other prosecuting authorities. This is likely to seriously damage the climate of compliance.'

The complete text of the letter can be found at: http://www.taxfac.co.uk/facultypublications/documents/10-923-1.doc

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